The operating profit margin was 13 percent for XYZ, Inc. in 2018, and it had $60 million in sales, $ $49 million of total assets, and $ 17 million of total liabilities. 7 percent is the interest rate for the company's debt, and tax rate is 21 percent. Calculate the company's operating income, net income, operating return on assets and return on equity

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11 May, 10:12

The operating profit margin was 13 percent for XYZ, Inc. in 2018, and it had $60 million in sales, $ $49 million of total assets, and $ 17 million of total liabilities. 7 percent is the interest rate for the company's debt, and tax rate is 21 percent. Calculate the company's operating income, net income, operating return on assets and return on equity

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Gage · Answer 1

operating income 7,800,000

net income 5,221,900

operating ROA: 15.91%

ROE : 16.32%

Explanation:

operating income

sales x operating profit margin

60,000,000 x 13% = 7,800,000

Now, to get net income we must subtract interest and taxes:

interest: 17,000,000 debt x 7% = 1,190,000

Earnings before taxes: 7,800,000 - 1,190,000 = 6,610,000

And now we apply taxes: 6,610,000 (1 - 21%) = 5,221,900

operating return on assets: operating income / total assets

7,800,000 / 49,000,000 = 0,1591836734693878 = 15.91%

return on equity:

net income / equity

equity is solve using the accounting equation:

assets = liab + equity

49,000,000 - 17,000,000 = equity = 32,000,000

5,221,900 / 32,000,000 = 0,163184375‬ = 16.32%